Ghana's Growth and Sustainability Levy (GSL) has become one of the most discussed tax measures in recent years. Introduced as part of the government's revenue mobilization efforts, this levy affects a wide range of businesses operating in Ghana. If you're a business owner, finance manager, or simply trying to understand your tax obligations, this guide explains everything you need to know.
What is the Growth and Sustainability Levy?
The Growth and Sustainability Levy is a temporary tax measure introduced by the Government of Ghana to support economic recovery and debt sustainability efforts. Unlike income tax, which is based on profits, the GSL is calculated on different bases depending on the type of business.
The levy was introduced through the Growth and Sustainability Levy Act, 2023 (Act 1095) and has been amended through subsequent Finance Acts. It applies to specific categories of businesses at varying rates.
"Unlike income tax, which is based on profits, the GSL is calculated on different bases depending on the type of business."
Who is Required to Pay GSL?
The GSL applies to several categories of businesses:
Category A: Banks and Financial Institutions
All banks, savings and loans companies, finance houses, and similar financial institutions are subject to GSL. This includes:
- Commercial banks
- Savings and loans companies
- Finance houses
- Leasing companies
- Mortgage finance companies
Category B: Mining and Upstream Petroleum
Companies engaged in mining (including gold, bauxite, manganese, and other minerals) and upstream petroleum operations are covered under GSL.
Category C: Electronic Communications
Telecommunications companies and other electronic communications service providers, including mobile network operators and internet service providers.
Category D: Other Specified Businesses
This category includes various other businesses such as:
- Insurance companies
- Betting and gaming companies
- Breweries
- Bulk oil distribution companies
- Cement manufacturing companies
- Other specified entities
GSL Rates and Calculation Basis
The levy rates and calculation bases vary by category:
Banks and Financial Institutions
Banks pay GSL based on their profit before tax. The rate has been set at various levels through amendments, so it's important to check the current applicable rate with GRA or your tax advisor.
Mining Companies
Mining companies pay GSL based on their gross production value, calculated at prevailing market prices.
Telecommunications Companies
Telecom operators pay based on their revenue from electronic communications services.
Other Businesses
The calculation basis varies; some pay on profit before tax, others on revenue or gross production, depending on the specific category and amendments in force.
Filing and Payment Requirements
Understanding when and how to file GSL returns is critical for compliance:
Filing Frequency
GSL returns are filed monthly. Unlike some taxes that can be filed quarterly or annually, GSL requires monthly compliance.
Due Dates
GSL returns and payments are due by the 15th day of the month following the month to which the levy relates. For example:
- January GSL is due by February 15
- February GSL is due by March 15
- And so on throughout the year
Where to File
GSL returns are filed through the GRA online portal (Ghana.GOV or the GRA Taxpayer Portal). Payment is made to the designated GRA accounts.
Required Documentation
Depending on your category, you may need to prepare:
- Monthly financial statements showing the calculation basis
- Production reports (for mining companies)
- Revenue statements (for telecom companies)
- Supporting schedules showing how the levy was calculated
Penalties for Non-Compliance
The GRA takes GSL compliance seriously. Penalties for non-compliance include:
Late Filing Penalty
Failure to file on time attracts a penalty, typically calculated as a percentage of the tax due or a fixed amount, whichever is higher.
Late Payment Penalty
Paying after the due date incurs interest charges on the outstanding amount. These can accumulate quickly, significantly increasing your tax burden.
Underreporting Penalties
If an audit reveals that you underreported your GSL liability, additional penalties and interest will apply on the shortfall.
"GSL returns are filed monthly, with payment due by the 15th day of the following month."
GSL and Financial Statement Presentation
How you present GSL in your financial statements matters for compliance and transparency:
Income Statement Treatment
GSL is typically presented as an expense in the income statement. Most companies show it as a separate line item or include it within operating expenses, depending on materiality.
Tax Deductibility
GSL is generally not deductible for corporate income tax purposes. This means you cannot reduce your taxable profit by the amount of GSL paid. Always confirm the current treatment with your tax advisor, as rules may change.
Disclosure Requirements
Your audited financial statements should include appropriate disclosures about GSL, including:
- The amount paid or payable for the period
- The basis of calculation
- Any changes in rates or bases compared to prior periods
Common Issues and How to Avoid Them
Based on our experience working with clients subject to GSL, here are common pitfalls:
Issue 1: Incorrect Calculation Basis
Problem: Using the wrong metric (e.g., revenue instead of profit before tax) leads to incorrect GSL amounts.
Solution: Verify your company's category and the correct calculation basis under the current legislation.
Issue 2: Missing the Monthly Deadline
Problem: The monthly filing requirement is easy to miss, especially for companies accustomed to quarterly or annual tax filing.
Solution: Set up automated reminders and build GSL into your monthly close process.
Issue 3: Not Tracking Legislative Changes
Problem: GSL rates and rules have been amended multiple times. Using outdated information leads to errors.
Solution: Work with a tax advisor who tracks legislative changes, or subscribe to GRA updates.
Issue 4: Cash Flow Surprises
Problem: GSL represents an additional tax burden that some businesses don't adequately plan for.
Solution: Include GSL in your monthly cash flow forecasts and maintain adequate reserves.
Is GSL Temporary?
The Growth and Sustainability Levy was introduced as a temporary measure. However, the duration has been extended through legislative amendments. As of now, businesses should plan for GSL to continue for the foreseeable future, while remaining alert to any announcements about its eventual phase-out.
The government has indicated that the levy is tied to economic recovery and debt sustainability targets. Once these targets are met, there may be scope for reducing or eliminating the levy.
Conclusion
The Growth and Sustainability Levy adds another layer to Ghana's tax compliance requirements. While it may feel burdensome, understanding your obligations and maintaining good compliance practices will help you avoid penalties and manage cash flow effectively.
Key takeaways:
- Know your category and the correct calculation basis
- File monthly by the 15th of the following month
- Stay updated on legislative changes that may affect rates or bases
- Plan for cash flow impacts of the additional tax burden
- Present correctly in financial statements
If you have questions about GSL or need help with compliance, our team is here to assist. We work with businesses across various sectors to ensure they meet their GSL obligations accurately and on time.